The Profit Ethic

The Profit Ethic

The profit ethic is the traditional ethical standard of business conduct in capitalistic systems. According to it the businessman makes decisions solely on the basis of which alternative will contribute the most to profits.

The only values he considers are those which can be expressed in monetary terms. to many, the logic of this ethic seems heartless, cruel, selfish, and even dishonest. Under the profit-maximization rule, a man might fire an old and faithful employee and hire an unknown off the street who offers to work at a lower wage. Or he might fool buyers by promoting shoddy merchandise at quality prices.

Although some businessmen use the profit ethic to rationalize base and underhanded business practices, most do not. The majority believe in it because it was founded on a well-developed philosophy embracing some of the noblest values in Western civilization.

The theory of how the economy works, developed by the eighteenth- and nineteenth-century British school of classical economics, provides the philosophical foundation for the profit ethic. There are four basic assumptions underlying this theory:

1 Natural law: There are natural laws governing the social activities of men just as there are physical laws governing nature.

2 Universal competition: Competition among individuals in free markets is the natural law of economic life.

3 "Economic man": Men are rational and entirely motivated to further their own economic self-interest.

4 Harmony of interests: Natural economic laws impose a social harmony that eliminates conflict among individuals and between the individual and society.

5. Another way of generating more profit instead of cutting costs or looking for savings, is to look to generate more income, and more output from every single employee. Adding value to the workplace, creating a healthy and appropriate environment whilst offering additional facilities like cold drinking water, the option of a free cafeteria etc can all help. See www.living-water.co.uk/.

5. One way of bringing a little bit of extra revenue into your business is to use a revenue sharing phone number, also called an 0844 number. Iin short, the person making the call pays a little more to make the call, and you get a certain amount back per minute. If you get lots of calls, this can soon add up!

A body of thought developed, based on these assumptions, which gave the businessman an ethical basis for pursuing his economic self-interest. He was convinced that, at the same time, he was acting in the best interests of society. The businessman looked upon himself as a small cog in the divine order of things. He was simply doing the "natural thing" by maximizing profits. If everyone in the economy-producers, customers, resource owners, and workers-did the same thing, it would produce the best possible social economic result. By narrowly focusing on profits, the businessman actually made his best possible contribution to society because that was the way the system worked. It was the economic system which the businessman believed best upheld the cardinal values of freedom, democracy, progress, and justice.

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Suppose a decision must be made whether or not to move a branch plant from a small town in which it is the economic mainstay to another area where production costs are lower.

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Whichever decision is made will have differential effects on the various groups involved. If the move is made and production costs are appreciably lower, profits may go up and lead to higher stockholder dividends; hourly earnings of workers may go up because of increased productivity; and customers may get a better product, a lower price, or both.

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On the other hand, the small town may become economically stagnant, and workers who are well settled in the town may face the choice of dislocation (and perhaps a cut in wages) or loss of job.